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Finite Horizon Dynamic Games with and without a Scrap Value

Author

Listed:
  • Reinhard Neck

    (Alpen-Adria-Universität Klagenfurt)

  • Dmitri Blueschke

    (Alpen-Adria-Universität Klagenfurt)

  • Viktoria Blueschke-Nikolaeva

    (Alpen-Adria-Universität Klagenfurt)

Abstract

In this paper, we examine the effects of scrap values on the solutions of dynamic game Problems with a finite time horizon. We show how to include a scrap value in the OPTGAME3 algorithm for the numerical calculation of solutions for dynamic games. We consider two alternative ways of including a scrap value, either only for the state variables or for both the state and control variables. Using a numerical macroeconomic model of a monetary union, we show that the introduction of a scrap value is not appropriate as a substitute for an infinite horizon in dynamic economic policy game problems.

Suggested Citation

  • Reinhard Neck & Dmitri Blueschke & Viktoria Blueschke-Nikolaeva, 2019. "Finite Horizon Dynamic Games with and without a Scrap Value," Proceedings of International Academic Conferences 9712064, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:9712064
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    File URL: https://iises.net/proceedings/iises-international-academic-conference-vienna/table-of-content/detail?cid=97&iid=030&rid=12064
    File Function: First version, 2019
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    More about this item

    Keywords

    dynamic games; scrap value; finite horizon; Pareto solution; feedback Nash equilibrium solution;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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